* Omission of funding is boost to United Technologies Corp
* GE-Rolls Royce confident their engine will survive (Adds quotes from companies, analysis, background)
By Jim Wolf
WASHINGTON, Sept 10, 2009 (Reuters) - A U.S. Senate subcommittee recommended no funding on Wednesday for an alternate F-35 fighter jet engine in a boost for United Technologies Corp (UTX.N), maker of an engine inching closer to a potential $100 billion monopoly.
But General Electric Co (GE.N) and Rolls-Royce Group PLC (RR.L), partners in developing the second engine, voiced confidence that a House of Representatives-Senate conference committee would preserve competition."What happened today is not a surprise," said Rick Kennedy, a GE spokesman. The Senate action followed a threat that President Barack Obama would veto a bill funding an alternate engine on the grounds it was wasteful.
A joint GE-Rolls Royce statement cast Sen. Daniel Inouye, a Democrat who chairs the Senate Defense Appropriations subcommittee, and Thad Cochran, the panel's top Republican, as longtime supporters of the second engine. The statement suggested they were maneuvering to rescue it at the 11th hour, in a budget conference with the House.
Inouye, a Democrat from Hawaii, "is going to act in a way that he feels is best to save the engine," Kennedy said. Inouye made no mention of the project in presenting his panel's 2010 spending plan.
GE and Rolls Royce said they were "confident of a successful outcome because competition and cost discipline in major defense procurement programs have proven to be in the best interest of taxpayers and our armed services."
Rob Blumenthal, a spokesman for Inouye of Hawaii, declined to comment. A spokesman for Cochran of Mississippi did not return a phone call.
At issue is a projected $100 billion market to power three variants of the single-engine F-35, a Lockheed Martin Corp (LMT.N) fighter in early stages of production. It would replace at least 13 types of warplanes, initially for 11 nations.
The alternate engine has become the latest bone of contention in a year in which the administration plans to end several big-ticket arms programs, including Lockheed's F-22 fighter jet, a presidential helicopter, combat rescue helicopters and an antimissile program known as the Kinetic Energy Interceptor.
The Pentagon says the F135 engine being built by Pratt & Whitney, a United Technologies unit, for the F-35 is doing well.
Pratt & Whitney expressed satisfaction with the omission of funding for its competitor.
"The F135 is performing exceptionally well in flight test, has retired 90-plus percent of program risk and is in production," said Erin Dick, a company spokeswoman.
By contrast, GE and Rolls-Royce cited a House Armed Services Committee finding that Pratt & Whitney's development program was $1.9 billion over budget.
Under the Senate subcommittee's version of the $636.3 billion defense appropriations bill for fiscal 2010, which begins October 1, funding would be omitted for alternate engine development, a summary of the panel's recommendations said. It did not say why.
The full Senate Appropriations Committee, also headed by Inouye, is to consider the bill on Thursday.
In July, the House voted 400 to 30 to approve a 2010 defense appropriations bill that included hundreds of millions of dollars for the second engine development.
Differences between the House and Senate bill must be resolved in a conference before final passage of a bill that can be signed into law.
The Senate subcommittee also recommended adding $2.5 billion to sustain Boeing's C-17 cargo plane line by buying 10 more in 2010. The administration wants to end the C-17 program without further purchases.
The House approved $674 million in its defense appropriations bill to buy three more C-17s.
Inouye said his panel was not in complete agreement with administration officials on ending arms programs but was concurring in general.
"I would like to remind my colleagues that the Defense Department has been wrong on several occasions in recommending program terminations," he added, without citing the engine. (Reporting by Jim Wolf; editing by Andre Grenon, Toni Reinhold)
Under the Senate subcommittee's version of the $636.3 billion defense appropriations bill for fiscal 2010, which begins October 1, funding would be omitted for alternate engine development, a summary of the panel's recommendations said. It did not say why.
The full Senate Appropriations Committee, also headed by Inouye, is to consider the bill on Thursday.
In July, the House voted 400 to 30 to approve a 2010 defense appropriations bill that included hundreds of millions of dollars for the second engine development.
Differences between the House and Senate bill must be resolved in a conference before final passage of a bill that can be signed into law.
The Senate subcommittee also recommended adding $2.5 billion to sustain Boeing's C-17 cargo plane line by buying 10 more in 2010. The administration wants to end the C-17 program without further purchases.
The House approved $674 million in its defense appropriations bill to buy three more C-17s.
Inouye said his panel was not in complete agreement with administration officials on ending arms programs but was concurring in general.
"I would like to remind my colleagues that the Defense Department has been wrong on several occasions in recommending program terminations," he added, without citing the engine. (Reporting by Jim Wolf; editing by Andre Grenon, Toni Reinhold)
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